ICICI Direct is optimistic about Cyient Ltd., a small-cap IT sector company. The brokerage recommended "buy" the stock of Cyient with a target price of Rs 920 per share. The brokerage sees a potential upside of up to 16% from its current level in 12 months.
The brokerage recently attended Cyient's analyst meet in Hyderabad. Cyient Ltd (Cyient) offers engineering & development services to aerospace & defence, transportation, E&U, communication and others. Cyient has 300 customers across 14 countries. Net debt free and healthy cash flow with OCF/EBITDA ~80%.
Stock Outlook & Returns
The stock of the company ended at Rs 799.55 apiece on NSE, 0.44% down from its previous close. The stock recorded its 52 week high level at Rs 1,133 on 24 November 2021, whereas, its 52 week low is Rs 720 which was recorded on 26 May 2022, respectively. It has a market capitalisation of Rs 8,833.12 crore.
The stock in a week has fallen 3.03%. In 1 month it surged by 3.94%. In the past 3 months, it fell by 4.75%. It has given 28.09% of negative return in the past 1 year. It has given multibagger returns 103.53% in the past 3 years. In 5 years, it gave 41% positive returns.
Management meet Highlights
Growth: The company is targeting US$250 million (mn) quarterly revenue run rate in FY24 from the current US$175 mn, to be driven by organic as well as acquisition synergies.
Revenue mix change Aerospace vertical revenue mix has come down from 34% to 26% now due to sluggish growth. The company expects it to further fall to 20% in FY24. The company expects growth to be fuelled by communications, healthcare, automobile, energy (largely sustainable programmes through recently acquired Citec).
DLM: It did not offer any incremental commentary on the DLM business due to regulatory requirement but expects a decision on this business by the end of the current fiscal.
ICICI Direct suggests buy stock for a target price of Rs 920/share
Cyient's share price has grown by ~1.5x over the past five years (from ~Rs 550 in November 2017 to ~Rs 794 levels in November 2022). "We maintain our BUY rating on the stock. We value Cyient at Rs 920 i.e. 14x P/E on FY25E EPS," the brokerage has said.
Key triggers for future price performance
Acquired entities to provide diversification, which, in turn, is expected to provide growth, looking at US$1 bn revenues in FY24. Improved demand from large deals, healthy order book, rebound in DLM business and organisation restructuring to accelerate growth. Strategic buyout a multi-year arrangement with an auto major.
The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.